THE KLSE this week recorded one of its strongest performances in recent years, with the Composite Index (CI) gaining nearly 5% on strong volume.
Second and third liners recaptured the interest of investors and punters yesterday after a two-day lull, and together with selected blue chips propelled the CI three points higher to 725. The CI has gained 34 points for the past week, the highest weekly point gain since the week of Jan 13 this year.
Trading volume fell from a three-and-a-half year high of 1.07 billion shares on Thursday to 828.2 million shares, but was still sufficiently large to digest some of the early sluggishness in the market.
Trade in the past three days was also the best seen since the dotcom boom days of February 2000.
Yesterday, gainers led losers by three to one, with the total value of trades coming in at RM1.39bil, compared with nearly RM2bil on Thursday.
The value of shares traded on the KLSE for the whole week was arguably the highest in more than a year. The last time the value of shares traded exceeded RM1bil on at least three consecutive days was in April 2002.
Don't dismiss a liquidity-led rally. All bull runs start off that way,'' said J.P. Morgan Malaysia head of research Tan Pye Sen.
Stocks pushed on in part due to better economic prospects down the horizon, and also to the influx of liquidity into the market after interest rates in Malaysia were cut by 50 basis points on May 21, when the economic package was announced.
Big buying orders from institutional funds, particularly foreign, gave the market added lift, evident on Wednesday and Thursday when solid gains were seen among the blue chips. The impressive performance on Thursday followed on the CI shooting past the key 700-point technical level on Wednesday.
Selective buying by institutional funds was evident yesterday and the focus continued to be banking stocks which, as a proxy to the economy, typically lead any market rally.
Expectations are that buying by foreign funds would continue for the next few months should optimism in the Malaysian and global markets be maintained.
Among the top gainers yesterday was Crest Petroleum Bhd, which added 12.4% or 65 sen to RM5.90. Shares in semiconductor assembler Unisem Bhd jumped 6.2% or 45 sen to RM7.75 and DMIB Bhd rose 17.9% or 33 sen to RM2.17.
While the run-up in blue chips is pushing valuations higher in the absence of real economic improvement, Tan said that was not a problem. When the cycle turns, there is very little obvious change in fundamentals. Remember, the market leads, never follows,'' he said.
The CI's rise over the past week was also due to positive technical factors having turned bullish during the recent run-up.
But the same technical indicators are pointing to the KLSE taking a short breather to absorb the acceleration in trading volume and value.
The market also needs to show ability to take out Thursday's volume. The only concern is the short term. In the intermediate term, technicals for the market are positive,'' said K&N Kenanga technical analyst Teoh Cheng Guan.